State Rep. Charlene Lima says she first became aware of the issue when her elderly mother found a $75 charge on her credit card bill from a major department store.
Lima investigated the matter, and discovered that the store had sent customers a “negative option” coupon: If they didn’t reply, they were automatically enrolled in a $75-a-month life insurance plan. When she tried to get the money back, she was told she had no recourse.
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Under the state’s “deceptive trade practices” law, Lima discovered, consumers can’t sue for any “actions or transactions” permitted under laws administered by the state Department of Business Regulation any other state or federal regulatory authority.
In other words, if the DBR regulates the department store’s issuance of credit cards, it’s up to the DBR to stop and/or fine the store if it acts improperly, and no one else can step in.
On Tuesday, Lima and a staffer for Attorney General Patrick C. Lynch urged the House Corporations Committee to pass two bills that would change that.
One, H-5981, would give the attorney general concurrent jurisdiction with all state agencies to enforce the provisions of the deceptive trade practices law for any action or transaction that the agencies had not explicitly authorized through a written rule, regulation, law, etc.
The second bill, H-5985, would repeal the exceptions to the deceptive trade practices law, set standards for consumer contracts – including the minimum type size – and forbid or void contract clauses that restrict or waive a consumer’s right to sue and get punitive damages, that bar class-action claims, or that gives the merchant legal remedies the consumer doesn’t have. Any restriction to the consumer’s available remedies, the bill says, must be printed in at least 14-point bold typeface and signed separately by the consumer.
The two bills are sorely needed, Lima testified, because under the current law, “we’re allowing businesses to effectively rip off consumers without recourse.” The DBR doesn’t help, she added, because “to the best of my knowledge, they have never fined anyone” for such things as what happened to her mother.
Moreover, Lima said, even if the DBR fined the merchants, there’s still no recourse for the consumers themselves. “Where is their compensation? There is none.”
State Supreme Court justices have noted in major rulings that legislators might want to change the deceptive trade practices law to protect consumers, Lima said. And groups such as the National Consumer Law Center have been urging states to take action against specific practices such as the use of arbitration clauses in cell phone contracts.
Lima first tried to change the law last year, but encountered strong opposition from business. But “any business that is not deceiving customers,” she said, “has absolutely nothing to fear.”
George Mason, of Lynch’s office, said the attorney general is “extremely supportive” of H-5985, and he provided a letter from Lynch that says the bill “would aid in protecting citizens from exploitive terms and conditions involved in all kinds of transactions, including those associated with banking, credit cards, home loans and health care services.”
Mason and Edmund F. Murray Jr., head of the attorney general’s antitrust unit, testified at even greater length on H-5981, which Lima introduced at Lynch’s request. Their office’s consumer protection unit gets numerous complaints from consumers who feel they’ve been deceived, they said, but whom they can’t help because of the way the law is written.
In a letter, Lynch explained that the state Supreme Court has further reduced his office’s ability to protect consumers by interpreting the law to exempt “all those activities and businesses which are subject to monitoring by state or federal regulatory bodies or officers” – meaning it can’t step in if any agency “has even the remotest degree of oversight.”
“The basic problem is that other agencies may not have enforcement powers, but simply licensing or registration authority,” Lynch wrote. That means his office can’t help the consumer, but neither can any other government agency.
Murray offered an example: Rhode Island just reached a settlement with Blockbuster over its “no late fees” policy, he said, that entitles consumers to refunds. But in this state, all Blockbuster stores are franchises, which have to be registered with the DBR. Under the current law, if a franchise “thumbs their nose at us” and refuses to comply with the settlement, Murray said, “a smart attorney” might win by citing the current law.
No one from the DBR attended Tuesday’s hearing, but Murray acknowledged that the department has problems with the concurrent jurisdiction bill – though he said both agencies are working to draft “mutually agreeable language.”
Lobbyists for the financial and insurance industries and for business in general, however, urged the committee to kill both of Lima’s measures.
“Insurance companies are among the most heavily regulated industries in the state,” testified Robert Suglia, lobbyist for Amica Mutual Insurance Co., showing legislators a thick book that governs his industry. H-5981 would create “a possibly duplicative and possibly conflicting regulatory scheme,” he argued, possibly giving Lynch authority over Amica’s advertising, how it sells policies, how it settles claims, etc.
As for H-5985, Suglia said, it would make the issuance of policies much more cumbersome, and could require entire pages of exclusions to be printed in 14-point type.
Allan W. Fung, of MetLife, said he agreed with Suglia’s remarks, and added that his company is not only subject to “full-blown” financial examinations by the DBR, but to market contact examinations that would catch any misconduct.
Fung also objected to anything that made it easier for consumers to sue, especially in class actions. “We owe a duty of good faith to our insureds, and we can in fact be sued for breach of that duty,” he said. “But I also know of several instances of frivolous class-action lawsuits.”
Terrance S. Martiesian, a lobbyist for several business and trade groups, including the National Federation of Independent Business, said the groups he represents strongly oppose Lima’s bill, both because of the potential “dual regulation” that H-5981 would impose, and because of the potential costs – which have them “very much concerned.”
The committee itself seemed to be split. State Rep. Joseph A. Trillo (R-Warwick) found the bills so objectionable that he got into an argument with Lima, mocking the notion of legally mandated type sizes and calling the bills “too much of a trap” for businesses.
But state Rep. Brian P. Kennedy (D-Hopkinton), the chairman, talked about tweaking the language to make the measures viable, particularly Lynch’s bill. And state Rep. Peter J. Petrarca (D-Lincoln) said he found it “funny” that DBR hadn’t sent someone to testify. “I don’t think, with some tweaking, that this is a bad bill,” he said.
